Changes to Law on Penalties and Liquidated Damages Affecting Property templates

Property - Changes to Contractual Penalties

February 2016

New Supreme Court appeal case on contract law

The judgments given in the Supreme Court decision on 4th November 2015 in the cases of Cavendish-v-Makdessi and ParkingEye–v–Beavis have had the effect of making some important changes to the law on penalties in contracts. These important cases are the first authoritative final appeal court decisions in 100 years to fully address, clarify, and amend the law on penalties in contracts.

The law on contractual penalties

The background is that many contracts, particularly contracts between commercial entities, include “liquidated damages” clauses, and in some cases as a matter of contract law they might amount to penalties. If a “liquidated damages” clause is deemed by a court to be a penalty, it will not be enforceable. It is therefore important for contract parties to minimise the risk that any clause in their contract is a penalty.

Additions and changes to our portfolio

In the light of the changes to the law made by the Supreme Court case and the useful guidance about penalties set out in the judgments in that case, we have taken the opportunity to update the Service Level Agreement (SLA) templates in our Property folder. These templates now fully take account of the changes and clarifications to contract law made in the Supreme Court’s recent decisions in the Cavendish and ParkingEye cases.

Relevant template documents in our Business folder have also been updated to take account of the recent changes in law. Please click here for further details.

The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific
legal matter.